CEO Security: Taxable Benefit or Business Necessity?

CEO Security: Taxable Benefit or Business Necessity?

• 18 November 2024
• Accounting
• Marita Jordaan

This article is based on tax law for the year ending 28 February 2025.

1. Background

A company hires an individual to serve as a bodyguard and driver for the CEO during office hours and work functions. The individual is employed by the company.

2. The Question

Is this arrangement considered a fringe benefit for the CEO, or is it classified as a normal security expense for the company?

3. Applicable Law 

ITA 58 of 1962 Section 8 and Seventh Schedule 

4. Application of the Law to the Facts

To assess whether the company’s employment of an individual as a bodyguard and driver for the CEO constitutes a taxable fringe benefit or qualifies as a standard business expense, we need to examine the employment agreement and the reasons behind the company’s provision of security to the CEO.

Section 8(1) of the Income Tax Act states that any amounts or benefits provided to an employee in the course of their employment may be deemed as income. 

In terms of par 2 of the Seventh Schedule “a taxable benefit shall be deemed to have been granted by an employer to his employee in respect of the employee’s employment with the employer, if as a benefit or advantage of or by virtue of such employment or as a reward for services rendered or to be rendered by the employee to the employer—

(e) any service…has at the expense of the employer been rendered to the employee (whether by the employer or by some other person), where that service has been utilized by the employee for his or her private or domestic purposes and no consideration has been given by the employee to the employer in respect of that service or, if any consideration has been given, the amount thereof is less than the amount of the lowest fare referred to in item (a) of subparagraph (1) of paragraph 10, or the cost referred to in item (b) of that subparagraph, as the case may be;…”

The individual is employed by the company as the CEO’s bodyguard and driver, primarily during working hours and at work-related functions. Since the service is used exclusively for business purposes by the CEO, not for personal or domestic use, it does not meet the criteria for a taxable benefit. The primary role of the bodyguard is to protect the CEO during business activities, suggesting that this arrangement aligns with legitimate business expenses.

However, if the service were provided primarily or partly for personal use and no consideration has been given by the CEO (e.g., the bodyguard serves the CEO outside regular business operations), it would then be classified as a taxable benefit.

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